Page 81 - VIRANSH COACHING CLASSES

2.3.7 Implied Adjustments :
In Receipts and Payments Account some additional information is given regarding certain
items. On the basis of such information some accounting adjustments are necessary. Such adjustment
are known as implied or hidden adjustments. Some implied (Hidden) adjustments are given below -
(These items are given in Receipts and Payments Account.
1) Rent (11 months) ` 11,000
st
2) 10 % Loan form Bank of India. ` 20,000 (Taken on 1 Jan 2020)
3) Leeshold Land ` 1,00,000 (for 10 year from 1 - 4 - 2019)
4) Sale proceeds of furniture (Book Value ` 7,500, ` 8,000)

Receipts and Payments Account
for the year ended 31 March 2020
st
Dr. Cr.
Receipts Amt Payments Amt
` `
By 10 % Fixed Deposit 1,00,000
(Deposited on 1 - 1- 2020)

In the above example implied adjustment is Outstanding Interest on fixed Deposit because :
i) No receipts of Interest on fixed Deposit is given.
ii) Rate of interest on fixed Deposit is given along with date of deposit with Bank.
Therefore, it becomes necessary to take into account the outstanding interest on fixed
Deposit for 3 months (i.e 1 - 1 - 2020 to 31 - 3 - 2020) at 10 % p. a. ` 2,500
Adjustment in final Accounts.
i) Outstanding Interest of Fixed Deposit ` 2,500 Should be credited to Income and
Expenditure Account.
ii) It is shown on Asset side of the Balance sheet. Add in Fixed Deposit or show separately
on the Asset side.

2.3.8 Capital Fund :
Capital fund is shown on the Liabilities side of Balance Sheet of ‘Not for Profit’ concern.
Capital Fund is created from capital incomes and by capitalising surplus, if any.
The Net Surplus is added in the Capital Fund and Deficit is deducted from Capital Fund.

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